June 12 (Bloomberg) -- A Spanish fund planned to aid lenders will be set up with 9 billion euros ($12.6 billion) and will have the capacity to raise an additional 90 billion euros in debt, Finance Minister Elena Salgado said.

The government is still working on the details of the plan, which will need the approval of parliament, Salgado told a news conference in Madrid today after a weekly Cabinet meeting. The government would raise the initial 9 billion euros with a debt issue, she said, adding that there was “no hurry” as “there is not one entity in difficulty.”

Spain, facing its worst recession in 60 years, had to rescue regional savings bank Caja Castilla La Mancha in March in its first bailout of the financial crisis and other savings banks have “problems,” Prime Minister Jose Luis Rodriguez Zapatero said on June 5. Spain’s banking system, which has so far shown more resilience than that of other countries, suffers from overcapacity and lenders that receive state aid will be forced to restructure, Salgado said on May 20. Public money will only be used once private solutions have failed, she said.

As unemployment and bankruptcies surge, bad loans at Spain’s banks rose 4.27 percent of total credit in March, the highest since 1996, compared with 1.2 percent a year earlier, the Bank of Spain said. Posing further risks to lenders, the European Commission expects Spain’s economy to continue shrinking next year, even as other European countries start to recover, pushing the unemployment rate to 20.5 percent.

The government, which does not have a parliamentary majority, has said it is negotiating the details of the fund with other parties. Zapatero said on June 5 the government wanted to reach a consensus with opposition lawmakers before sending the bill to parliament.

To contact the reporter on this story: Emma Ross-Thomas in Madrid at erossthomas@bloomberg.net

Last Updated: June 12, 2009 10:53 EDT